Over half of U.S. small business owners believe the economy is already in a recession, though their own financial conditions remain strong and they have less concerns about the health of their banks, according to a survey by the National Federation of Independent Business.
The number of corporate bankruptcies in the US is increasing at the fastest pace since 2010, with over 400 corporations going under so far in 2023, reflecting overstretched balance sheets and rising interest rates.
Insurance companies facing bankruptcy due to climate disasters are a warning sign of an impending banking crisis, and urgent action is needed from regulators to prevent financial crashes and costly bailouts.
China's debt-fueled property boom and faltering exports, coupled with defaults and bankruptcy filings by major companies, suggest that the Chinese economy may be heading towards a significant crisis.
The US economy may face disruption as debts are refinanced at higher interest rates, which could put pressure on both financial institutions and the government, according to Federal Reserve Bank of Atlanta President Raphael Bostic.
Societe Generale's Albert Edwards warns that a recession is still looming as small firms face increasing bankruptcies due to high interest rates, which could eventually affect larger firms as well.
Bankruptcies have increased by 17% in August, marking the 13th consecutive month of rising company failures, as businesses struggle to cope with the Federal Reserve's interest-rate hikes.
The odds of a recession in the US have collapsed, making markets vulnerable to any signs of the economy overheating and contributing to inflationary pressures.
Summary: Lehman Brothers' bankruptcy in 2008 during the global financial crisis, along with several other major crashes in history such as the 1929 Wall Street collapse and the 2020 pandemic, have resulted in significant stock market crashes and economic crises.
The US economy is facing a looming recession, with weakness in certain sectors, but investors should not expect a significant number of interest-rate cuts next year, according to Liz Ann Sonders, the chief investment strategist at Charles Schwab. She points out that leading indicators have severely deteriorated, indicating trouble ahead, and predicts a full-blown recession as the most likely outcome. Despite this, the stock market has been defying rate increases and performing well.
US economist Stephanie Pomboy has issued a warning about the economic risks posed by the increasing number of corporate bankruptcies in the country, which she believes could surpass the magnitude of the 2008-2009 financial crisis. Pomboy emphasizes that many market participants have not fully grasped the gravity of the situation and calls for a significant fiscal and monetary response to address the issue.
Commercial bankruptcy filings are on the rise, with big-name companies such as Bed Bath & Beyond, Silicon Valley Bank, and Party City all folding, reflecting the challenges posed by the end of pandemic funds, sticky inflation, a slower global economy, and a sharp increase in the cost of capital. However, while bankruptcy rates are growing, they remain significantly lower than previous recessions, and the economy is still growing, providing opportunities for displaced workers to find re-employment.
The regional banking crisis in the U.S. during March of this year has had lasting effects on the industry and the economy, with tightened credit conditions and a risk of over-correction in interest rates, according to interviews with regional bank executives and economists.
A potential government shutdown in the U.S. could negatively impact the country's credit rating, highlighting weaknesses in institutional and governance strength, according to Moody's Investors Service. The economic impacts would be concentrated in areas with significant government presence, and the severity of the effects would depend on its duration. If prolonged, it could have a more pronounced effect on business and consumer confidence as well as financial markets.
Orders for durable goods in the US rose 0.2% in August, primarily due to increased defense spending, while core orders, which exclude defense and transportation, increased by 0.9%, suggesting a positive sign for broader business investment. However, overall business investment remains weak due to rising interest rates and recession fears, indicating a stagnant industrial sector. Higher borrowing costs are expected to continue to impact the sector and economic growth in the future.
The recent surge in long-term interest rates, reaching the highest levels in 16 years, poses a threat to the US economy by putting the housing market recovery at risk and hindering business investment, as well as affecting equity markets and potentially slowing down economic growth.
Investors are increasingly fearful due to a mix of factors including rising oil prices, expectations of higher interest rates, a sluggish Chinese economy, and the possibility of a US government shutdown, leading to concerns of a prolonged period of stagflation and a potential recession.
Investors may become increasingly concerned about the US debt ceiling drama, eroding confidence in the country and potentially leading to a sell-off in stocks, while factors such as the upcoming Fed meeting and a challenging earnings season could also impact the markets.
The US economy may be on the brink of a recession due to a combination of factors including the impact of Fed hikes, auto strikes, student loan repayments, higher oil prices, and a global economic slowdown.
